What is the Economic Impact of Military Spending?


Question/Comment: I would like to know the impact of military spending on our economy. It seems like it’s a pretty hefty percentage of the annual budget, almost equal to that spent on Social Security; more than is spent on Medicare. (And it’s more, actually, if you include money spent annually on veterans benefits.) My rudimentary source is “The World Almanac Book and Book of Facts” for 2009 p. 96-7. I also note that many of the defense contractors (p. 173) are companies listed that affect the daily stock market figures. Though defense spending is projected to go up again in 2009, I’m wondering why? Does Iraqi reconstruction get bundled into defense spending or become part of another budget line item? If overseas forces were reduced substantially, how would that affect unemployment?

Paul Solman: Military spending is huge and wasteful (think of the iconic $600 toilet seats – though why you’d want a toilet seat as an icon is anybody’s guess). It’s even corrupt. (Read the transcript to our Sept. 21, 2007 military procurement story on body armor, or watch it below.)

Editor’s Note: You can find all of Paul’s segments on spending priorities for military equipment here.

But military spending is no greater today than spending on social security and it’s less than the amount now spent on Medicare and Medicaid. The social welfare programs are sure to increase. If military spending simply held constant, it would fall in percentage terms (as a fraction of all federal expenditures, that is.)

Sure, defense contractors are part of the stock market: the biggest of them are very big companies.

As to why defense spending might be going UP? We’ve got military commitments all over the world and we’re resolved to stay ahead technologically.

Finally, if forces were reduced overall, that WOULD figure to exacerbate unemployment. But deploying them at home as opposed to overseas would not affect unemployment and would actually HELP the U.S. economy, in that their spending would be stateside.